This copy is for your personal non-commercial use only. To order presentation-ready copies of Toronto Star content for distribution to colleagues, clients or customers, or inquire about permissions/licensing, please go to: www.TorontoStarReprints.com

Procter & Gamble brings back A.G. Lafley as CEO

A.G. Lafley, 65, replacing CEO Bob McDonald, takes over at a time when the world’s largest consumer-products maker tries to spur growth in the face of stiff global competition.

Procter & Gamble Co., based in Cincinnati, says former CEO A.G. Lafley, a 33-year industry veteran, is returning its top post. He'll be running the world's largest household products maker, replacing Bob McDonald immediately, in the midst of a major restructuring. (Oct. 6, 2010) (SHANNON STAPLETON / Reuters File Photo)

By Mae AndersonAssociated Press

Fri., May 24, 2013

NEW YORK—Household products giant Procter & Gamble Co. is hoping its former CEO can work his magic once again.

The Cincinnati company said late Thursday that former CEO A.G. Lafley, a 33-year industry veteran, is returning to its top post. The surprise move comes as the world’s largest consumer-products maker tries to spur growth in the face of stiff global competition.

Lafley, 65, replaces CEO Bob McDonald, effective immediately. McDonald, who will retire June 30 after a transition period, has served as CEO since 2009. Lafley, who led P&G from 2000 to 2009, also is taking the president and chairman titles.

Traders appeared to approve of the move. Procter & Gamble shares rose $2.80, or 3.6 per cent, to $81.50 in premarket trading 90 minutes ahead of the market opening.

The 175-year-old company’s Tide detergent, Crest toothpaste and other products can be found in 98 per cent of American households. But it is struggling to grow.

Article Continued Below

In his first stint at the helm, Lafley helped right an ailing P&G, emphasizing innovation and a “consumer-is-boss” focus. That included spending more time in personal observation and interviews with consumers.

He also pulled off the blockbuster $57 billion acquisition of the Gillette Co. in 2005, expanding P&G’s reach into male-oriented products with Gillette’s shavers and razors.

“A.G.’s track record and his depth of experience at P&G make him uniquely qualified to lead the company forward at this important time,” said board director Jim McNerney.

P&G is known for its premium products that cost more than competitors but are perceived by customers to be of higher quality. But growth for the company has slowed in developed markets like North America and Europe.

Like many of its rivals, P&G has been expanding into rapidly growing emerging markets such as Latin America, India and Russia. But there, it has faced tough competition from already entrenched smaller rivals such as Dutch consumer-products maker Unilever and Colgate-Palmolive.

In order to spur growth, P&G has been cutting costs and rolling out new products. The company is in the middle of a belt-tightening plan aimed at saving $10 billion by 2016. And it has introduced new products or brand expansions including Tide Pods single-use laundry pellets, Downy Unstopables, a washer sheet that adds scent to clothes, and a stronger version of Secret deodorant called Clinical Strength.

But investors have been frustrated by the company’s slow revenue growth and stagnant market-share gains globally. The pressure stepped up last July, when activist investor William Ackman took a 1 per cent stake. He has been vocal about the company’s need to streamline operations and improve results.

“It sounds like the board needed a change at the top,” said Bernstein analyst Ali Dibadj. “We thought maybe there would be a little bit more of a test runway for current management, but clearly, frustration was very high.”

P&G last year acknowledged that it had made missteps in some emerging markets — which make up nearly 40 per cent of its sales — when it expanded in some product areas too quickly. And it introduced a plan to focus on its 20 biggest new products and its 10 most-profitable emerging markets, which has led to improving market share.

The moves seemed to be working.

In P&G’s most recent January-to-March quarter, net income rose 6 per cent to $2.57 billion, as revenue inched up 2 per cent to $20.6 billion. But that fell slightly short of analysts’ expectations of $20.72 billion. It had also begun to gain market share in North America. But fourth-quarter guidance was below expectations as the company spent more to market new products.

Lafley said the board approached him “very recently” after McDonald decided to retire and asked him to reclaim the top spot.

“Frankly, duty called,” he said in an interview with The Associated Press. “I’m back, I’m full on.”

His first order of business, he said, will be to stay on the strategic course that the company has been implementing, focusing on core developed markets as well as developing markets, introducing new products and cutting costs.

“I spent nearly 33 years at this company, and the company has got some momentum right now,” he said.

P&G’s shares rose 54 cents to $79.24 in aftermarket trading.

Delivered dailyThe Morning Headlines Newsletter

The Toronto Star and thestar.com, each property of Toronto Star Newspapers Limited, One Yonge Street, 4th Floor, Toronto, ON, M5E 1E6. You can unsubscribe at any time. Please contact us or see our privacy policy for more information.

More from the Toronto Star & Partners

LOADING

Copyright owned or licensed by Toronto Star Newspapers Limited. All rights reserved. Republication or distribution of this content is expressly prohibited without the prior written consent of Toronto Star Newspapers Limited and/or its licensors. To order copies of Toronto Star articles, please go to: www.TorontoStarReprints.com